• Inflation down to 9.1 percent in June.
• Yield on 5-year bond trimmed by 25 basis points.
• Equity indices drove further southwards.
• Ghana cedi advanced against the US dollar but lost grounds versus the British pound and Euro.
• Brent crude oil, Gold and Cocoa recorded gains. 

Macroeconomic Update

Inflation down to 9.1 percent in June

Inflation for the month of June 2019 settled at 9.1 percent, down by 0.3 percentage point from May’s figure of 9.4 percent. The dropped in consumer price inflation was on the back of lower inflation pressures recorded at both the food and non-food segments of the economy. Inflation at the Food and non-alcoholic beverages sub-sector dipped by 0.2 percentage point to 6.5 percent in June. The rate of price change for milk, cheese & eggs; oils & fat; and cereals & cereal production were the lowest. Inflation at the non-food group also declined from 10.6 percent in May to 10.3 percent with inflation rates at the Education, Utilities and Communications sub-sectors being the lowest.

Source: BOG; MOFEP; GSS.     * represents provisional estimate

Government of Ghana Treasury Securities

NB: The above are the annual yields on Government of Ghana Treasury Securities.

Yields on Government of Ghana treasury securities witnessed mixed adjustments. The yield on the 91-Day T-Bill rose by a basis point to 14.73 percent, that on the 182-Day Bill remained unchanged at 15.17 percent but the interest rate on the 364-Day T-Bill trimmed 5 basis points to 17.87 percent. The yield on the 5-year bond also declined by 25 basis points to 19.50 percent. Interest rate on Government of Ghana 2-year and 3-year bonds however, remained unchanged.

An amount of GHS679.18 million was raised by the Government, after accepting all bids tendered by investors. This fell below the week’s target of GHS726.00 million but exceeded the GHS293.94 million raised in the previous week’s auction. The 91-Day T-Bill was the most purchased bid constituting 75.84 percent of the total bids accepted by the Government. Also, the 5-year fixed bond issued in the week under review, saw Government accepting all the GHS617.72 million bids tendered. In the upcoming auction, an amount of GHS785.00 million is expected to be raised from the issuance of both the 91-Day and 182-Day T-Bills.

The normality of the yield curve was sustained amidst the rate moderation recorded in the week under review. The persisting interest rate moderation is expected to continue following strong commitment by Government through the Bank of Ghana in making long-term investments more attractive than their short-term counterparts. Also, the prolonged of the equity market and uncertainties in the financial market is compelling investors to demand more of the Government treasury bills even at reduced rates.

Ghana Stock Exchange

Equity indices drove further southwards spurred by profiting taking activities and decline in risk taking among investors. With all trading sessions ending on a bearish note, the benchmark Composite Index dropped by 0.49 basis points to settle at an index point of 2,318.73, representing a year-to-date loss of 9.85 percent. The GSE Financial Stocks Index similarly, declined by 1.66 basis points to 2,004.40 percent, corresponding to a negative year-to-date return of 6.93 percent.

A total of 1.52 million shares valued at GHS5.42 million exchanged hands on the bourse. This represents 51.09 percent increment over previous week’s volume and Fan Milk Ltd emerged as the most actively traded stock accounting for 57.43 percent of the overall traded volume. Market capitalization however, declined by 0.54 percent to settle at GHS57,957.31 million. 

Stock Price Movements

Paring the week’s opening and closing prices, two advancers and ten laggards were recorded.  GCB Bank Ltd and MTN Ghana Ltd had their share prices upped by a pesewa each to trade at GHS4.95 and 71 pesewas per share respectively.

On the downside, Access Bank (Ghana) Ltd was the worst performing stock, trimming 50 pesewas of its opening price to settle at GHS3.39 per share. Fan Milk Ltd followed suit with 42 pesewas decline to close at GHS4.51 per share. CAL Bank Ltd and Ecobank Ghana Ltd went down by 5 pesewas each to trade at 95 pesewas and GHS7.50 per share respectively. Share prices of Guinness Ghana Breweries Ltd and Enterprise Group Ltd also dipped by 3 pesewas and a pesewa to settle at GHS2.15 and GHS2.09 per share respectively. Other laggards on the bourse were Société Générale Ghana Ltd, Ecobank Transnational Incorporated Ltd, Camelot Ghana Ltd and Benso Oil Palm Plantation Ltd.

Currency Market

Source: Bank of Ghana 12.07.19

On the interbank currency market, the Ghana cedi slightly appreciated against the US dollar but lost grounds to both the British pound and the Euro. The US dollar dimmed its outlook, recording its biggest weekly drop in three weeks on the international currency market. Fed’s concerns about activities slowdown in the US economy since the emergence of US and China trade war, persisting lower-than-expected inflationary pressures and downturn in investment activities, as well as commitment to cut interest rate in the next monetary policy review saw the greenback depreciating for three-consecutive days. The US dollar thus recorded a week-on-week depreciation of 0.10 percent to trade at GHS5.26 on the interbank currency market. The year-to-date depreciation of the cedi thus reduced to 8.27 percent.

The British pound posted a marginal gain, lifted by upbeat economic reading from the UK economy. UK’s GDP is forecasted to grow by 0.1 percent in the three months ending May 2019, down from a contraction of 0.3 percent recorded in the three months to April. Growing hopes for an interest rate hike by the Bank of England to stimulate economic activities in the event of a no-deal Brexit offered some support to the pound. The British pound thus gained 2 pesewas to trade at GHS6.60 on the interbank currency market. The year-to-date depreciation of the cedi thus widened to 6.49 percent.

The Euro lost value as decision by the European Union to lower growth and inflation outlook for 2019 in the bloc due to trade risk affected demand. Eurozone GDP was downwardly reviewed from 1.9 percent to 1.2 percent in 2019, similarly, inflation is projected to end the year at 1.3 percent from an earlier estimate of 1.4 percent. Also, the appointment of Christine Lagarde as head of the European Central Bank was mired with speculation that she could ease monetary policy much-than-expected weighed on the single currency. Despite the euro’s loss, it recorded a week-on-week appreciation of 0.19 percent to trade at GHS5.91. The year-to-date depreciation of the cedi thus increased to 6.76 percent.

International Markets

Wallstreet closed higher driven by gains posted by the Industrials, Basic Materials and Technology sectors shares on account of increased optimism for a rate cut by the US Fed. The S&P 500 thus advanced by 0.8 percent to settle at 3,015.50 points. The Dow Jones Industrial Average also recorded a weekly gain of 1.96 percent to close at 27,332.03 points.

The London Stock Exchange edged lower due to a resurgent pound arising from an upbeat UK GDP data and signals by the Bank of England to trim interest rate much lower than investors’ expectation. The FTSE 100 thus slipped by 0.61 percent to end the trading week at an index level of 7,503.50 points.

The Japanese Stock Exchange recorded another round of weekly gain buoyed by improved demand in some top-weighted stocks – Fast Retailing Ltd and Convenience Store Lawson Inc. following upbeat first-quarter earnings report. The Nikkei 225 thus rose by 0.70 percent to close the week at 21,685.90 points.

On the African equity market, the Nairobi All Share Index dipped by 0.05 percent to an index level of 149.73 points. The Johannesburg All Share Index recorded a weekly loss of 0.79 percent to settle at 57,277.35 points. The Nigerian All Share Index also slipped by 2.46 points to close at 28,566.79 points.

International Markets

Source:www.bloomberg.com, & www.investing.com

Brent crude oil advanced significantly as concerns over Tropical Storm Barry threatened global production amidst OPEC’s production output cut which supported the energy commodity. The Tropical Strom Barry affected crude oil production in the Gulf of Mexico, trimming its output by over 1 million barrels a day; it is projected to affect other major oil production countries. Brent crude oil thus added $2.49 to trade at $66.72 per barrel.

Gold closed on a positive note as the dovish monetary policy stance by the US Fed shifted investors demand for safe-haven assets. Weak inflation concerns following the trade war between the US and China as well as other daunting developments in the UK and EU economies buoyed demand for the yellow metal. Gold thus rose by $16.05 to trade at $1,417.65 per ounce.

Cocoa supported by a recent effort by Ghana and Ivory coast to impose a fixed “living income differential” of $400 on every tonne of cocoa contracts beginning from the 2020/21 crop season closed the soft crop in the gains. This measure which intends to replace an earlier proposal for a floor price for cocoa contracts was widely accepted by top cocoa buyers following its advantage in combating poverty among farmers. Cocoa thus added $64.00 to trade at $2,528.00 per metric tonne.

Coffee declined after the week’s trade on the international currency market as concerns over weakening Brazilian real affected the demand of the soft crop. At the close of the trading, the soft crop 3 cents to trade at $1.07 per pound.